Exposure compared with collateral
Leverage describes the relationship between economic exposure and the capital supporting it. If a hypothetical position has exposure of 1,000 units of currency and is supported by 100 units of capital, its simple exposure-to-capital ratio is ten to one. That illustration does not specify an actual product's required margin. The key point is that market movements affect the exposure, while the smaller supporting amount absorbs the resulting changes.
A symmetrical example
In that simplified example, a one-percent change in the full exposure equals ten currency units before costs. A favorable move adds that amount, while an equally adverse move subtracts it. Relative to the 100 units of supporting capital, the change is much larger than one percent. Financing, spread, conversion and contract details can further affect the result, so use the example to understand sensitivity rather than to predict a real account balance.
Read the ongoing requirements
Entry margin is only one part of a leveraged agreement. Requirements can change, unrealized losses can reduce available collateral and the provider may have rights to close positions. Consider those mechanisms before choosing a size. FYLU's lesson does not advertise a leverage ratio or establish live margin terms. Any actual transaction requires verified specifications, applicable restrictions and an understanding of how much could be lost under adverse conditions.